Effortless employee retention credit Recording in QuickBooks: Follow These Simple Steps
employee retention credit (ERC) has become a valuable and necessary benefit for businesses amidst the ongoing COVID-19 pandemic. The ERC allows businesses to claim a tax credit for retaining their employees during this difficult time. With QuickBooks, the popular accounting software, you can easily record and track your employee retention credit. In this article, we will guide you through the simple steps to effortlessly record your ERC in QuickBooks.
Step 1: Understand the employee retention credit
Before recording the employee retention credit in QuickBooks, it’s essential to understand the basics of the ERC. The ERC is a refundable tax credit designed to encourage businesses to retain their employees and continue paying wages during the pandemic. The credit is calculated based on qualified wages paid to eligible employees and is claimed on the business’s federal employment tax returns.
Step 2: Update your QuickBooks
To ensure a seamless process, make sure you are using the latest version of QuickBooks. Regular software updates are crucial to access the latest features and functionalities.
Step 3: Set up a new account
In QuickBooks, go to the Chart of Accounts section and set up a new account to track your employee retention credit. To do this, select “Lists” from the menu bar and click on “Chart of Accounts.” Then, click on the “Account” menu and choose “New.” Select the appropriate account type and name it something like “employee retention credit.” Finally, save the new account.
Step 4: Record the employee retention credit
To record the ERC, create a new Journal Entry. To do this, click on the “Company” menu, then select “Make General Journal Entries.” Fill out the appropriate fields, including the date, credit account (the account you created in Step 3), and the amount of the credit. Add a corresponding memo to help you remember the purpose of the entry. Once you have completed the Journal Entry, save it.
Step 5: Track the employee retention credit
Tracking your ERC within QuickBooks is important for accurate reporting and easy access to the information. An effective way to accomplish this is by using classes or locations. To create a class, go to the “Lists” menu and select “Class List.” Click on “Class” and choose “New.” Create a class specifically for your employee retention credit, and assign it to all transactions related to the credit.
If you prefer using locations, instead of classes, you can follow a similar process but use the “Location List” instead of the “Class List” in the “Lists” menu. Assign all relevant transactions to the location you created for the employee retention credit.
Step 6: Run reports
Now that you have successfully recorded and tracked your employee retention credit in QuickBooks, it’s time to run reports to analyze the data. Go to the “Reports” menu and select “Standard,” then choose “In-depth.”
From the list of available reports, select the ones that suit your needs in tracking and analyzing your ERC. Some recommended reports include the Profit and Loss by Class or Location, Payroll Summary, or the General Ledger report. These reports will provide you with a comprehensive overview of your employee retention credit and help you assess its impact on your business.
In conclusion, QuickBooks makes it easy to record and track your employee retention credit. By following these simple steps, you can effortlessly keep your financial records accurate and compliant while also maximizing the benefits of the ERC. As always, consult with a tax professional or accountant to ensure accuracy and compliance with the ever-changing tax laws and regulations.